Corporate Directors: Duties and Attributes

• Directors are fiduciaries with extensive discretionary power in company dealings
• The nomination committee determines the best mix of director qualifications

Attributes of Best Directors

• Sense of common purpose
• Industry knowledge
• Business sense
• Leadership
• Trust
• Diversity
• Courage and integrity

Due Diligence Before Accepting Directorship

• Financial stability and future course of the company
• Tone set by the board
• Understanding the compliance environment
• Talk to the company secretary
• Indemnification
• Is there a fit

Fiduciary Duty

• Fiduciary means to act in the best interest of the company
• Directors can be held liable for breaches of fiduciary duty
• Accepting directorship means assuming duty of care, skill, and judgement

Duties of Directors

• Duty of care, skill, and diligence
• Duty to act in good faith and the best interest of the company
• Duty to act within the boundaries of authority
• Act in good faith and for a proper purpose
• Independence of action
• Access to information
• Act intra-vires (not acting outside the limits of authority)
• Liability to account for profits
• To act as a board
• To avoid conflict of interest
• Statutory duty of declaration of interest

Penalties for Failure to Discharge Duties

• Directors may be held liable for both criminal and civil penalties
• Directors are liable for company loss if they act outside the law

Circumstances for Director Resignation

• Fundamentally disagreeing with company direction
• Culture clash
• Diminished personal contribution
• Shortage of time
• Discomfort with board leadership
• Breakdown of trust
• Shareholder discontent
• Own misbehaviour
• Company is financially distressed

Lifting the Corporate Veil

• Ignore the separate legal personality of the company to investigate who is really controlling it
• This happens with fraud and misconduct involving misuse of the company's legal personality

Officers of the Company

• People formally employed by the board for day-to-day affairs
• Includes Chief Executive Officer, Chief Financial Officer, and Chief Audit Executive

Chief Executive Officer (CEO)

• Bears ultimate responsibility for all management functions
• There should be a division of responsibilities between the chairman and the CEO
• The chairman runs the board, while the CEO runs the company per the board's strategic direction

Roles of the CEO

• Develop and recommend long-term strategy to the board
• Recommend business plan and budget
• Monitor day-to-day operations
• Develop and maintain an ethical environment
• Develop succession plans
• Oversee the implementation of corporate policies
• Ensure compliance with laws and regulations

Chief Financial Officer (CFO)

• Guardian of the company's financial health
• Ensures compliance with regulatory developments
• Ensures accounting supports strategic objectives
• Communicates with stakeholders

Company Secretary Responsibilities

• Ensure board procedures are followed and legal requirements are met
• Provide directors access to relevant information
• Oversee the induction of new directors
• Publish board resolutions and policies
• Oversee the rotation of directors per MOI
• Ensure transparent director appointments

Chief Audit Executive

• Head of the internal audit function
• The audit committee appoints and removes the chief audit executive
• Assess corporate governance, risk, and internal controls
• The internal audit function must be independent

Roles of External Auditors

• Examine financial statements and compliance
• Ensure proper accounting records
• Ensure proper minute books
• Ensure registry of interests
• Ensure accounting records adhere to IFRS and GAAP
• Ensure the director's reports align with company affairs
• Ensure compliance with company acts

Remuneration of Directors

• Executive and non-executive directors
• Executive directors are remunerated as members of management
• Non-executive directors do not automatically have the right to be remunerated
• Remuneration is provided for by Section 66 of the Companies Act of 2008

Approval of Directors' Remuneration

• It must be approved by a special resolution of shareholders
• Directors drawing unauthorized remuneration may be liable to the company in damages

Disclosure of Directors' Remuneration

• The King Code recommends detailed disclosure
• Financial statements must disclose remuneration paid to non-executive directors per the Companies Act
• Remuneration includes bonuses, options, expenses, waived interest, non-financial benefits, etc

Effect of Incentive-Based Remuneration on Director Independence

• It has the potential to create a conflict of interest
• This is due to difficulty determining performance indicators, lack of transparency, and complex schemes
• The King IV code prohibits remuneration being contingent on performance to avoid impairment of independence.

Waiver of Remuneration

• Must be in writing and signed by the director

Remuneration Report

• The King IV recommends that it be fair, responsible, and transparent

Contents of Remuneration Report

• Background statements
• Remuneration policy
• Implementation report

Background Statement Details

• Internal and external factors
• Key focus areas of the remuneration committee
• Major changes to remuneration policy
• Statement on the remuneration policy's objective

Remuneration Policy

• Guiding principles for remuneration decisions
• Attract, motivate, and retain talent
• Promote strategic objectives
• Promote ethical culture
• Set out measures for implementation

Implementation Report

• Shows remuneration quantum of each director, salary, incentives and other benefits
• The report forms part of the annual financial statements

Remuneration Philosophy

• Create value over the long term, be fair and responsible
• Be aligned with the company's strategy
• Be linked to contribution
• Exclude factors outside control

Approval of Remuneration Policy

• Non-executive fees must be approved by a special resolution
• The King IV code recommends tabling the policy for approval by shareholders via a non-binding advisory vote

Executive Remuneration

• Executive director's remuneration needs to be disclosed
• Balancing pay and performance is a key decision

What is Transparency?

• Allowing others to see the truth without trying to hide or alter facts
• Relies on the ability of third parties to process and understand data

Managing Communication

• Need to manage communication across multiple spheres
• Transparent and effective communication is fundamental

Integrated Reporting and Integrated Thinking

• Focuses on issues affecting sustainability
• The active consideration by an organisation

Important Element of Integrated Thinking

• Financial
• Manufactured
• Intellectual
• Human
• Social & Relationship
• Natural

Statutory Records and Reporting

• The company must keep a set of prescribed registers and minute books
• Comply with certain administrative regulations
• The annual financial statements must include reports
• Annual returns act

Sustainability Reporting

• The ability to endure and remain viable beyond the short term

Whistleblowing

• Exposes illegal, unethical, or corrupt activity